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Thursday, December 09, 2010

Initial Claims - What Do They Mean?

We all know the numbers. The release is here. But take, for example, the Bloomberg article:
The number of workers filing first- time claims for unemployment insurance payments fell last week in the U.S., showing the labor market continues to improve.

Applications for jobless benefits decreased to 421,000, less than the median forecast of economists surveyed by Bloomberg News, from a revised 438,000 the prior week, Labor Department figures showed today. The four-week moving average, a less-volatile measure, dropped to the lowest level in more than two years.
See, we don't know that the labor market is improving. The reason we don't know is that in November, we saw a very nice and consistent drop in initial claims, yet the November employment report showed that job losers and those completing temporary jobs rose by 390,000 SA from October. Apparently the reason initial claims were lower was that many did not qualify for benefits and did not file for them.

We have little current experience with this deep and protracted labor downturn, so trying to calibrate this data with post WWII recessions helps little. We'll find out what all this means when the December report comes out January 7th, with the additional problem that that release incorporates a bunch of revisions, followed by the new quarterly B.E.D birth/death adjustment schema which takes effect for the release in February.

I hope that this nice fall in claims means something real. I don't know that it does. Seasonal adjustments also have more impact at this time of year. Actual initial claims this week were 582,007, which sounds rough unless you know that initial claims for the comparable week in 2009 were 665,85. We seem to be clocking around 80K less each week in initial claims.

The other things about the November employment report which worried me so were that in unemployment duration, SA, the < 5 weeks number rose 171,000, and the number of discouraged workers rose over 400,000 compared to 2009. I wrote before about the sharp rise in unemployment among the college-educated.

I can tell you what I think is going on, but it is really a guess. I can only hope it is an educated guess. I think that employment in private industries is kind of marking time with a little underlying improvement, but that the real negative pulse is in government, with some knock-on from government-related job categories in the private sector.

If you look at Table A-14, you see that the most government-linked categories show significant YoY increases in unemployment, whereas the least government-linked employment categories show significant improvement YoY.

I bring this up because the sloppy economic reporting may well be fooling politicians into thinking that we can safely cut people off from benefits because they can find jobs, while in fact there is little solid evidence for that theory. If I were running the country, at this point I would be instituting a daily public jobs program, in which persons could show up, work a day, and get paid. It doesn't have to be for high wages, and in fact such a program is less susceptible to working off the books and claiming benefits at the same time than an unemployment benefits extension.


Comments:
There are a couple of issues with a public works plan. Many of the folks on unemployment are making more money than they could at a minimum wage job. If they work beyond a certain point,they lose their benefits. It makes it less likely they will take a lower paying job until forced to do so.

I did work on one of those "Whip Inflation Now" jobs under the Ford/Carter administration. It was nice to have it for sure and they paid for tires for my pickup to make sure I could get to work. It didn't lead to anything or give me any useful skills.

I definitely think we'd be better served to move folks onto public works jobs versus very extended benefits. You need to get back into that work mode: going to work every day, doing something for your paycheck besides putting in resumes. Wish I'd had that option back during the tech bust.
 
"If I were running the country, at this point I would be instituting a daily public jobs program, in which persons could show up, work a day, and get paid."

I've been on unemployment twice and my girlfriend currently is. That said, I think you should run the country. It makes no sense to pay people to sit at home, well, almost no sense anyway. Check this out.

My girlfriend started a new part time job yesterday. She was supposed to work 15 hours this week preparing benefits packets. She noticed mistakes (individual insurance should not cost more than family), pointed them out, and was rewarded by being sent home early. They need to reprint everything.

She worked 2 hours. It was about 12 miles from home. That was my example in the sarcasm report! Figures! At least she wasn't paid minimum wage.

So anyway, perhaps we could offer a "stay at home" public works project instead. The thought of filling the streets with even more single occupant vehicles burning gasoline is just too much.

What could people do? I'd be in favor of paying people to further their education if nothing else. That could be done at home. Something is better than nothing and certainly much better than "something for nothing".
 
The problem with public works projects is the public employees unions are a lot more powerful today than 35 years ago. (For example, public transit agencies derived from failed private transit companies were in their infancy.) The states may love it - get payroll off their books and onto the fed rolls but it just further whittles away state autonomy. You can bet there will be plenty of strings attached, too - if your state wants public works jobs then you can't opt out of Obamacare. Regardless of my speculation, you will run into lots of flak about collectively bargained work rules and wages and the possibility of skirting them with a public make-work program.

Add in the fact that a lot of public works done today is essentially free thanks to the War On Drugs and Alcohol forcing far too many people into public service hours - you'll wind up changing that dynamic and probably not for the better because The War On Drugs And Alcohol itself is a jobs program.

The last problem is the public works jobs will be fertile ground for union recruitment. At some point, only the untermensch will be working for private companies.
 
I agree with Charles. There are a number of things in the Liberal agenda that would make sense in a rational system. But so many of them are impossible or ineffective because the factions that formed in the 1930's to support those policies have reified into rent-seeking wanna-be aristocrats.

They're really no different from the plutocratic crony capitalists of the Gilded Age, except their legacy is less infrastructure and more strife.
 
Let's bring out the bogeyman of unions. I believe there are those who want the standard of living to fall for all but themselves. No tariffs, no taxes for the rich, no benefits for the poor. Policies should be rewarding work, not speculating, not your social status, businesses that game the system.

Sporkfed
 
One idea that I think gets overlooked in talking about unemployment benefits is micro-entrepreneurship. I know a heck of a lot of people who make a few crafts or soaps to sell at boutiques, or buy used books at thrift stores and sell them on eBay, or fix up antique electronic equipment and sell it, etc. These tiny business owners are subject to all the laws that go with big, full-time businesses. Most of them find it impossible to comply and just ignore the laws.

But if you're on unemployment or disability, you can't do any of this, because if you get caught they'll take away your benefits. One friend of mine was threatened with the loss of his benefits because he made a few reproduction medieval bows and sold them to friends. (My brother bought one of his last before the government made him quit.) There was no way he could possibly support himself with such a niche product, and yet it was treated as if he had a full-fledged business.

Also, if it were easier to hire someone to work a few hours a week, I think there would be more working going on. Tons of businesses don't have enough extra work to make one whole job, and would love to hire somebody to work a few hours, but won't because they can't afford to add a whole other employee to their payroll and/or don't want to get somebody new every week from the temp agency.

I think the people would be well-served if the government would do more to encourage micro-entrepreneurship and other "marginal" (in the business-calculus sense) economic activity.
 
Wacky Hermit said, "Tons of businesses don't have enough extra work to make one whole job, and would love to hire somebody to work a few hours, but won't because they can't afford to add a whole other employee to their payroll and/or don't want to get somebody new every week from the temp agency.'

Yeah, here in my area I'm seeing a lot of "Help Wanted" signs in the windows of restaurants and retailers. My guess is that the businesses want part timers and are having a problem getting people to work part time.

My wife and I eat out at least one night a week. Our observation has been that the restaurants we frequent (Applebees, Johnny Carinos, Olive Garden, etc.) seem busier in the last four months. That's anecdotal stuff, but when I was working as an airline pilot, I could tell how business was doing very esily by the way our loads were increasing or decreasing.

The way the Dems are fighting the tax/unemployment benefits compromise just injects more uncertainty into the game. Why don't they understand that the uncertainty is one of the main factors holding the recovery back?
I guess they think no one pays attention to such things. Aarrgghh!!!
 
I am also hearing of people trying to work off the book so they can keep their unemployment. That is one of the unintended consequences of 99 weeks of unemployment.
 
Jimmy - especially if people have to drive. Driving 30 miles round trip for four or five hours minimum wage is kind of a losing proposition.

I know restaurant wages have fallen quite a bit in a lot of areas.
 
Rick - I would say that is more common than not. If you can get 10 or 15 hours weekly off the books, it won't support you, but it does help.

In all honesty, a public works program has a lot of advantages. 99 weeks (max, it's less for some) unemployment is a problem. But not providing anything else is an even larger problem.

I don't think we want people on unemployment for three or four years. I think everyone can agree on that. But we don't have jobs for the unemployed. In November, in absolute numbers, over 14 million were unemployed and over 5 million not counted as unemployed wanted jobs.

We do not have these jobs. Moralizing about the demoralizing effect of being on unemployment for years won't create them, either.
 
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